Housing Ministry Director: Apartment Prices Will Continue to Fall, But Not Dramatically
Translated & summarized from Ynet by baba
Yehuda Morgenstern, Director General of Israel's Ministry of Construction and Housing, expects apartment prices to continue falling moderately due to high construction volumes. He criticized developers for inflating land prices in state tenders. Industry representatives, including Amit Gottlieb and Roni Brik, warned of project delays and potential future housing shortages due to high costs, interest rates, and political uncertainty. They urged government prioritization of the construction sector and suggested state acquisition of apartments for public housing.
The story in 6 lines · by baba
- Housing Ministry Director Yehuda Morgenstern predicts apartment prices will continue to fall, but not dramatically.
- Morgenstern criticized developers for bidding excessively high prices in state land tenders.
- Industry leaders warned of potential future housing shortages due to high costs and uncertainty.
- Amit Gottlieb called the metro project's 72% betterment levy "delusional" and a "model of failure."
- The construction sector faces challenges including labor shortages, high financing costs, and bureaucracy.
- Industry leaders urged the government to prioritize construction and infrastructure development.
Yehuda Morgenstern, Director General of the Ministry of Construction and Housing, expressed surprise at the high prices developers are offering for state land tenders, stating, "Offer less for the land and you can sell cheaper later." Speaking at a real estate conference in Eilat, Morgenstern criticized developers for driving up land costs and predicted that apartment prices will continue to decline in the coming years, though not drastically. This comes amid a housing market slowdown, a surplus of unsold new apartments, and high financing and construction costs hindering new projects.
Morgenstern argued that developers themselves contribute to high land prices, with winning bids in competitive tenders being about 15% higher than valuations. He emphasized the state's goal is not profit from land but lower consumer prices. He based his price drop forecast on high construction volumes in recent years, projecting around 70,000 new housing starts in 2024, 80,000 in 2025, and 78,000 in 2026, exceeding the annual need of 60,000-65,000 units. "We are building more than we are growing," he stated, anticipating a large supply when buyers return to the market.
He also criticized past policies on long-term rental housing, calling the previous decade's approach a "primordial sin" that failed. The Ministry of Housing and the Planning Administration are now working on a dedicated planning product for rentals, with the state currently forgoing approximately half a million shekels in land revenue per long-term rental unit. Morgenstern also indicated he would consider continuing his role under a different government, stressing the importance of continuity in professional positions.
Amit Gottlieb, Chairman of the Contractors and Builders Association, Tel Aviv and Central District, criticized the financing model for the Gush Dan metro project, particularly the 72% betterment levy, calling it "delusional" and a "model of failure." He warned that the construction industry faces challenges from labor shortages, high financing costs, bureaucracy, and the ongoing war, with high interest rates hindering new investments and potentially impacting future housing supply. Gottlieb suggested the state use the current market slowdown to purchase existing apartments for public housing.
Yair Kaplan, CEO of Jerusalem Bank, described a worrying situation for developers, noting many are delaying projects despite having permits due to economic uncertainty. He observed developers focusing on completing existing projects and strengthening cash flow, even while bearing financing costs for previously acquired land. Roni Brik, President of the Association of Contractors and Builders of Israel, urged the government to prioritize the construction and infrastructure sector, highlighting that political uncertainty impedes long-term planning and project advancement. "There is no housing without execution," he stated, emphasizing the need for stable construction companies to meet national housing targets.
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